Managerial Finance Essay

2527 Words Jan 6th, 2012 11 Pages
Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle DellaTorre, a professional tennis player who has just come to the United States from Chile. DellaTorre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer. DellaTorre is very bright, and she would like to understand in general terms what will happen to her money. Your boss has developed the following set of questions you must answer to explain the U.S. financial system to DellaTorre. a. Why is corporate finance important to …show more content…
S-Corporation – similar to a corporation but does not get double-taxed.

Proprietorship - it is difficult for a proprietorship to obtain large sums of capital, the proprietor has unlimited personal liability for the business’s debts, and the life of a business organized as a proprietorship is limited to the life of the individual who created it.
Partnership - unlimited liability, limited life of the organization, difficulty of transferring ownership, and difficulty of raising large amounts of capital. Corporation: corporate earnings may be subject to double taxation and setting up a corporation and filing the many required state and federal reports is more time-consuming than for a proprietorship or a partnership. Also, corporations do not relieve the owners of professional liability. Limited Partnership – the limited partner typically have no control. c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?

A company goes public when it sells stock to the public. As the firm grows, it might issue additional stock or debt. An agency problem occurs when the managers of the firm act in their own self- interests and not in the interests of the shareholders. d. What should be the primary objective of managers? The corporation’s primary goal is stockholder wealth maximization. * Do

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